IL&FS Board Working towards Reducing Significant Debt by July 2020: Uday Kotak
Moneylife Digital Team 31 December 2019
Debt-ridden Infrastructure Leasing & Financial Services Ltd (IL&FS) is committed to completing the resolution process at the earliest and is working towards addressing significant portion of addressable debt by July 2020, says Uday Kotak, chairman of IL&FS. He was addressing shareholders at the annual general meeting (AGM) of IL&FS called by the new board. 
 
According to Mr Kotak, resolution, restructuring and recovery formed the three vital pillars of the strategy adopted by the new board of IL&FS. "Measures undertaken by the new board of IL&FS would result in overall recovery in the region of 50% of the outstanding debt as of 30 September 2018 but different across levels as well as entities," he added. 
 
IL&FS group has a total outstanding of over Rs90,000 crore. 
 
"IL&FS group had emerged as a 'test case' on group wide resolution of stressed assets," he says, adding, "the absence of requisite legal framework for group resolution under IBC required the new board to propose the first-of-its-kind resolution framework that balanced interest of stakeholders across classes and levels, while keeping broad principles of corporate finance in mind."
 
He says, “The combination of complex group structure comprising financial services, infrastructure and other businesses, high level of debt and diverse nature and type of creditors at various levels of the group represent a very unique scenario which is far removed from other well-known cases of distressed Indian companies in the recent past.”
 
Here are key highlights of the resolution progress, as outlined by Mr Kotak...
  • IL&FS group’s stake in seven wind power SPVs (special purpose vehicles) sold for nearly Rs4,300 crore covering 100% of entity-level debt and including equity value of nearly Rs590 crore.
  • Binding bid received for Chinese Road Asset that will resolve nearly Rs1,600 crore debt and additional Rs980 crore towards equity value for the shareholding entity.
  • Binding bids received for 10 road assets. Five assets with combined financial debt of Rs9,500 crore referred to respective creditor committees for next steps.
  • Infrastructure investment trust (InvIT) being set up for nine road assets with total financial debt of more than Rs11,000 crore.
  • Approval received from government of Gujarat to purchase IL&FS group’s stake in Gujarat International Finance Tec-City Company Ltd (GIFTCL) resolving debt of approximately Rs1,200 crore.
  • Group-wide real estate assets with estimated value of around Rs3,500 crore being sold.
  • Sale of other assets in energy, transportation, waste management, technology, water, urban infrastructure verticals currently under way.
  • Cash reserve of Rs6,500 crore as on 30 November 2019 - with nearly 87% of these funds parked in instruments like fixed deposits and money market mutual funds.
  • Reduction in wage bill by 48% and operating expenses by 42%, on an annualised basis, between 31 October 2018 and 31 October 2019.
  • Debt restructuring completed for three assets with total debt of Rs5,100 crore. These assets have now started servicing all debt obligations. Discussions ongoing for restructuring of further Rs10,000 crore of financial debt.
  • Over 40 'green' companies are regularly servicing nearly Rs7,200 crore of debt.
  • Extensive discussions ongoing with concession authorities to expedite release of claims in excess of Rs5,000 crore filed by group’s transportation vertical.
Comments
Mahesh Kalkar
2 years ago
This video has lot of similarities to Ms Sucheta Dalal's articles. Is the Govt responsive to it is the question.

https://www.youtube.com/watch?v=siCM--dvnos&t=35s
Meenal Mamdani
2 years ago
We are lucky that we have corporates with integrity such as Mr. Kotak who was given (no doubt arm twisted by govt) to take on this thankless job of resolving the ILFS mess.

It would be ungrateful for us to now carp about why only 50% recovery, etc.

Yes, taking a haircut is painful and more so for small investors. But that is the price investors pay when they put their money in any entity. After all, nothing is as safe as money in one's pocket. But that money does not grow and therefore investors look for safe places where they can park their money.

Now if the govt wants to encourage savings and investment in the economy, it will simplify the rules so that cheaters like ILFS are caught and brought to justice quickly. The latter is important as if investors see these big honchos living in luxury while the courts drag on and on, the investors begin to lose faith in the system.

ILFS directors must be sent to prison for sufficiently long period of time so that the sentence serves as a deterrent for potential cheaters.
Mahesh Kalkar
Replied to Meenal Mamdani comment 2 years ago
Ms Sucheta Dalal is doing a fantastic job. Here is a video which will be to her liking.

https://www.youtube.com/watch?v=siCM--dvnos&t=35s
S Balakrishnan
2 years ago
50% recovery.
Where's the rest?
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